James Dean looks at a week of stock market gloom
It is now more than a week since global stock markets plunged, dipping to just under 5,600 points on Monday 21 January. The FTSE 100 has recovered a little to 5,750, although it still sits way off October’s year high of 6,732.
The non-life insurance sector has fared better than the FTSE 100 over the past week. Its relative value has tracked above that of the FTSE 100 over five years, but dropped to a similar level on 21 January. However, recovery has been rapid.
This is perhaps reflected in some notable price recoveries. In fact, with the benefit of hindsight, there were some bargains to be had. Taking a snapshot of the week from 21 January, Catlin shares shot up 18.5%, trading at 357p on Monday 28 January (although they remain down 7.8% over 30 days).
But perhaps the greatest story was that of THB, the AIM-listed Lloyd’s broker. When the collapse of its acquisition of PWS was announced on 15 January, shares fell from around 88p to 70p, then through the global collapse on the following Monday they slumped to around 60p. A few days after it managed to acquire PWS, shares are back up to 80p – a 35% gain over the week. As a result of the acquisition, Numis (which acts as broker to THB) increased THB’s target price by 10p to 100p.
From Monday 21 January to Monday 28 January Brit, Aviva and Prudential rose double digits – by 11.8%, 10.5% and 10% respectively. Brit shares were trading at 220p, Aviva at 610p and Prudential at 631p. Even so, all three, like Catlin, were down over 30 days.
Prudential was given a particularly good write-up by Lehman Brothers, which pointed out great strength in its Asian franchise. Asia accounts for around 50% of Prudential’s new business profits – far higher than its European peers.
Numis remains most confident in Brit and Hiscox stock, and both companies allayed some fears during conferences this week. Brit said it was confident in meeting 2007 EPS expectations, and reassured once again on its exposure to professional indemnity claims in the wake of US sub-prime litigation. But Hiscox remains Numis’s number one pick. Shares were trading at 275p as Insurance Times went to press – up 9.8% on the week but down 1.8% on the month.